Republican tax plan kills electric vehicle credit

The nascent market for electric cars will suffer a big setback if the Republican tax plan released on Thursday enters into law. Among the changes to the current tax code would be an end to the Plug-In Electric Drive Vehicle Credit. That's the tax incentive that currently means up to $7,500 back from the IRS when you purchase a new battery or plug-in hybrid electric vehicle.

Since the start of 2010, the EV tax credit has been $2,500 for a plug-in vehicle with at least 5kWh battery capacity. Every extra kWh nets another $417 up to a maximum of $7,500, although you would need at least that amount in income tax liability—the IRS won't cut you a check to make up the full amount. It was never meant to be permanent; once an automaker sells 200,000 qualifying vehicles (starting from January 1, 2010) its eligibility is phased out over a matter of months.

But in the almost seven years since, no one has reached that limit yet. Tesla will almost certainly be first, with General Motors not far behind; between them, they've sold a lot of Model Ses and Chevrolet Volts. If this tax plan is enacted, it will surely mean pain for both companies, as well as anyone else hoping to sell a lot of EVs here in the US. The data is pretty clear—tax incentives sell electric cars, and the market for EVs can dry up very fast when they're abolished, as Georgia's recent experience shows.

GM told Ars that "tax credits are an important customer benefit that can help accelerate the acceptance of electric vehicles. Because General Motors believes in an all-electric future, we will work with Congress to explore ways to maintain this incentive." Tesla was not immediately available for comment.

Renewables for investors not so bad

Things aren't quite as bad on the renewable energy side. There are new incentives to invest in small-scale wind, geothermal, solar, or fuel cell energy properties, and others have been extended. The nuclear industry also gets an extension on a tax incentive that was meant to expire in 2021. But the wind industry won't be happy. Currently, wind power qualifies for a 2.3 cents/kWh credit; under the new scheme this would be just 1.5c/kWh.

"It is noteworthy that the architects of the House bill focus their efforts to save funds on the dwindling temporary incentives for renewable energy, rather than the permanent incentives for fossil fuel, which have in many cases been on the books for more than 90 years," said Gregory Wetstone, CEO of the American Council on Renewable Energy, in a statement. Beyond a few minor tax credits, the oil industry receives very little attention in the Republican plan.